Regulatory

Slovakia: Grid Tariff or Solar Tax?

A support scheme for renewable energy projects in Slovakia is generally guaranteed for 15 years. But from January 2014, a new special fee was introduced, which lowers the main feature of this support – the feed-in tariff.

Renewable energy in Slovakia

Slo­va­kia as a mem­ber of the EU is required to increase its use of renew­able ener­gy sources (RES) by 2020 to the ratio of 14%. To achieve that, the respec­tive EU leg­is­la­tion was imple­ment­ed and a com­pre­hen­sive legal sys­tem for pro­mot­ing the use of RES came into force in Slo­va­kia from 2009. This sup­port scheme is based main­ly on a fixed feed-in tar­iff, guar­an­teed for each gen­er­a­tor of elec­tric­i­ty from RES for 15 years fol­low­ing the plant being put into oper­a­tion.

This sup­port scheme was the main rea­son for the fast devel­op­ment of many RES projects in 2010 and 2011, espe­cial­ly in the solar sec­tor. How­ev­er, the gov­ern­ment feared that such fast devel­op­ment would lead to an unstop­pable “El Dora­do” and to an unsta­ble elec­tric­i­ty grid, and thus devel­op­ment of main­ly solar facil­i­ties for prof­it was effec­tive­ly stopped in July 2011. Nev­er­the­less, the RES facil­i­ties put into oper­a­tion ear­li­er are still guar­an­teed high feed-in tar­iffs for next 11 – 12 years.

New special grid tariff

In autumn 2013 the reg­u­la­tor (Reg­u­la­tion Office for Net­work Indus­tries; RONI) effec­tive­ly decreased this feed-in tar­iff by intro­duc­ing a new spe­cial fee via sec­ondary leg­is­la­tion. This spe­cial fee means that, from Jan­u­ary 2014, a gen­er­a­tor of elec­tric­i­ty must pay a levy (the so-called G-tar­iff or G-com­po­nent) to the sys­tem oper­a­tor for reserved capac­i­ty of its ener­gy facil­i­ties with­in the trans­mis­sion or dis­tri­b­u­tion sys­tem. Note that all ener­gy gen­er­a­tor are sub­ject to the G-tar­iff, not only those using RES

This spe­cial levy is, in case of con­nec­tion to a dis­tri­b­u­tion net­work, ca EUR 16,000 to EUR 21,000 (depend­ing on dis­tri­b­u­tion sys­tem oper­a­tor) per MW per year in 2014. This means that sup­port for the RES projects was in fact decreased by ca 5% through the G-tar­iff. The amount of the G-tar­iff is set by RONI sep­a­rate­ly for each year, so changes of the amount are pos­si­ble.

Legal issues with the G-tariff

Since its intro­duc­tion, the G-tar­iff has been wide­ly crit­i­cised (also the Euro­pean Com­mis­sion has expressed its con­cerns). It is argued that it is in fact a “solar tax” to low­er gov­ern­men­tal sup­port for RES facil­i­ties. RONI replies that this fee is just a way for elec­tric­i­ty gen­er­a­tors to par­tic­i­pate in the costs of devel­op­ment and main­te­nance of the elec­tric­i­ty grid and is not focused on RES facil­i­ties, since it is also paid by elec­tric­i­ty gen­er­a­tors from con­ven­tion­al sources. So in the eyes of the RONI, this fee is just a grid charge, not a solar tax in dis­guise.

Still, elec­tric­i­ty gen­er­a­tors, espe­cial­ly from solar projects, are using all avail­able legal options to fight the fee. The G-tar­iff has been chal­lenged on the lev­el of RONI and is also sub­ject to var­i­ous lit­i­ga­tion pro­ceed­ings, includ­ing before the Slo­vak Con­sti­tu­tion­al Court. The lat­ter seems the most promis­ing “defence mech­a­nism” as it could lead to the abol­ish­ment of the G-tar­iff from the leg­is­la­tion.

The G-tar­iff is being chal­lenged on the nation­al lev­el for the fol­low­ing main rea­sons:

  • con­tra­dic­tion with the ener­gy leg­is­la­tion, espe­cial­ly with the pro­vi­sions guar­an­tee­ing the feed-in tar­iff for the whole peri­od of the incen­tive scheme (15 years);
  • infringe­ment of a con­sti­tu­tion­al­ly guar­an­teed pro­tec­tion of pri­vate prop­er­ty;
  • breach of the prin­ci­ple of legal cer­tain­ty or legit­i­mate rea­son­able expec­ta­tions of the oper­a­tors of solar plants (the Slo­vak Con­sti­tu­tion­al Court has well-devel­oped case-law pro­hibit­ing retroac­tive changes to leg­is­la­tion); and
  • the leg­isla­tive process was not car­ried out pro­ce­du­ral­ly as required by law, and the G-tar­iff was intro­duced only by a sec­ondary leg­is­la­tion.

In addi­tion to the options under Slo­vak law, there are also fur­ther options to fight on the inter­na­tion­al lev­el. For instance, the Euro­pean Com­mis­sion may start an infringe­ment pro­ceed­ing against Slo­va­kia. Or investors could use bilat­er­al treaties on pro­tect­ing invest­ments (BIT), which Slo­va­kia has con­clud­ed with var­i­ous coun­tries.

Outlook

Sup­port schemes in var­i­ous EU mem­ber states were amend­ed as a reac­tion to the solar (or gen­er­al­ly RES) boom. Some of these coun­tries (eg, Spain) used a dras­tic approach, while oth­ers were more sophis­ti­cat­ed, to “sur­vive” legal chal­lenges by elec­tric­i­ty pro­duc­ers.

It remains to be seen whether the Slo­vak G-tar­iff will also pass such test. But the intro­duc­tion of this fee, and its nature, might indeed be breach­ing sev­er­al prin­ci­ples of the law, espe­cial­ly legal cer­tain­ty. It will thus be inter­est­ing to see how the Slo­vak courts and author­i­ties deal with it.

The introduction of this fee, and its nature, might indeed be breaching several principles of the law, especially legal certainty. It will thus be interesting to see how the Slovak courts and authorities deal with it.